How to walk in the footsteps of Warren Buffett

Warren Buffett: How to invest like investing gurus

Investors have long sought wisdom and counsel from the equity market’s so-called gurus, but the attempt to emulate their success has been taken to another level in recent years due to a growing number of online options that focus on the strategies and latest moves of history’s best investors.

“These guys have outlined their strategies to the point of becoming a blueprint,” said Justin Carbonneau, managing director at Validea Capital Management LLC in Connecticut. “By creating portfolios based on these strategies, investors can systematically follow a good fundamental approach that is disciplined.”

Validea.com is one of several paid-subscriber websites that have jumped into the guru-investing game during the past few years. It incorporates and utilizes the publicly disclosed stock selection strategies of ultra-successful investors to create model portfolios based on three primary investment styles: value, growth and a growth/value hybrid.

By creating portfolios based on these strategies, investors can systematically follow a good fundamental approach that is disciplined

The value models, for example, include computerized strategies based on the approaches of Warren Buffett and Benjamin Graham, but also the less well-known John Neff, Joel Greenblatt, David Dreman and Joseph Piotroski.

The growth strategies, meanwhile, consist of approaches from the likes of Martin Zweig and Tom and David Gardner of The Motley Fool. The combo growth/value strategies are based on techniques used by Peter Lynch, Kenneth Fisher, and James O’Shaughnessy.

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Validea Capital, which is a separate investment advisory firm managed by Validea.com founder John Reese, blends these different methodologies to create client portfolios. In Canada, Validea is the sub-advisor on two National Bank mutual funds: The Omega Consensus American Equity Fund, which gained 6.73% in 2012; and The Omega Consensus International Equity Fund, up 10.7% last year.

Mr. Carbonneau said last year’s top U.S. performing model was the value investor portfolio based on Benjamin Graham’s strategy. It climbed 33.8% versus a 13.4% gain for the S&P 500.

The top performing model in Canada, however, was the book/market investor portfolio based on Mr. Piotroski’s strategy. It was up 32.4% in 2012 compared to 4% for the S&P/TSX Composite Index.

Another popular website that provides subscribers with research and analysis of guru strategies and ideas is GuruFocus.com, headquartered in Texas.

The site is primarily dedicated to value investing and its two most famous disciples, Mr. Graham and Mr. Buffett, but it also lets users compare and contrast insights from other well-regarded investors such as Carl Icahn, Bill Ackman and Canada’s own Prem Watsa.

Charlie Tian, GuruFocus’s founder and CEO, said the idea for the website came to him after reading Peter Lynch’s books and 40 years’ worth of Mr. Buffett’s shareholder and partnership letters.

“Upon finishing all of the letters, I was exhausted. I felt like a hungry man who had his first ever full meal in his life. I was thinking: ‘This is the right way to invest. This is the right way to invest!’” he said in a message posted on the website.

Earlier this week, GuruFocus launched Canadian stock coverage in phase one of its global expansion. It said Computer Modeling Group Ltd., National Bank of Canada, Metro Inc. and Bank of Nova Scotia are the most predictable and undervalued stocks in the country right now.

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